Typpes Of Market Segmentation

MODUL PERKULIAHAN
Distinctive Strategic
Management
Marketing issues
Segmenting Strategy
Targeting Strategy
Positioning Strategy
Fakultas
Program Studi
Ekonomi & Bisnis
Magister
Manajemen
Tatap Muka
11
Kode MK
Disusun Oleh
35009
Dr. Baruna Hadibrata, SE., MM
Abstract
Kompetensi
This module illustrates Marketing
issues
Segmenting Strategy
Targeting Strategy
Positioning Strategy
Understanding Marketing issues
Segmenting Strategy
Targeting Strategy
Positioning Strategy
Pembahasan
Ethical Issues in Marketing
Ethical problems in marketing stem from conflicts and disagreements. Each party in a
marketing transaction brings a set of expectations regarding how the business relationship
will exist and how transactions should be conducted. Each facet of marketing has ethical
danger points as discussed below.
Market Research
Some ethical problems in market research are the invasion of privacy and stereotyping. The
latter occurs because any analysis of real populations needs to make approximations and
place individuals into groups. However, if conducted irresponsibly, stereotyping can lead to
a variety of ethically undesirable results.
Market Audience
Selective marketing is used to discourage demand from so-called undesirable market
sectors or disenfranchise them altogether. Examples of unethical market exclusion are past
industry attitudes to the gay, ethnic minority, and plus-size markets.
Another ethical issue relates to vulnerable audiences in emerging markets in developing
countries, as the public there may not be sufficiently aware of skilled marketing ploys.
Ethics in Advertising and Promotion
In the 1940s and 1950s, tobacco used to be advertised as promoting health. Today an
advertiser who fails to tell the truth offends against morality in addition to the law. However
the law permits puffery (a legal term). The difference between mere puffery and fraud is a
slippery slope.
Sexual innuendo is a mainstay of advertising content, and yet is also regarded as a form of
sexual harassment. Violence is an issue especially for children's advertising and advertising
likely to be seen by children.
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
The advertising of certain products may strongly offend some people while being of interest
to others. Examples include: feminine hygiene products as well as hemorrhoid and
constipation medication. The advertising of condoms has become acceptable in the
interests of AIDS-prevention, but are nevertheless seen by some as promoting promiscuity.
Through negative advertising techniques, the advertiser highlights the disadvantages of
competitor products rather than the advantages of their own. These methods are especially
used in politics.
Delivery Channels
Direct marketing is the most controversial of advertising channels, particularly when
approaches are unsolicited. TV commercials and direct mail are common examples.
Electronic spam and telemarketing push the borders of ethics and legality more strongly.
Deceptive Advertising and Ethics
Deceptive marketing is not specific to one target market, and can sometimes go unnoticed
by the public. There are several ways in which deceptive marketing can be presented to
consumers; one of these methods is accomplished through the use of humor. Humor
provides an escape or relief from some kind of human constraint, and some advertisers
intend to take advantage of this by deceptively advertising a product that can potentially
alleviate that constraint through humor.
Anti-competitive Practices
Bait and switch is a form of fraud where customers are "baited" by advertising for a product
or service at a low price; second, the customers discover that the advertised good is not
available and are "switched" to a costlier product.
Planned obsolescence is a policy of designing a product with a limited useful life, so it will
become unfashionable or no longer functional after a certain period of time and put the
consumer under pressure to purchase again.
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Pusat Bahan Ajar dan eLearning
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A pyramid scheme is a non-sustainable business model that involves promising participants
payment or services, primarily for enrolling other people into the scheme, rather than
supplying any real investment or sale of products or services to the public.
Pricing Ethics
Bid rigging is a form of fraud in which a commercial contract is promised to one party,
although for the sake of appearance several other parties also present a bid.
Predatory pricing is the practice of selling a product or service at a very low price, intending
to drive competitors out of the market, or create barriers to entry for potential new
competitors.
Using Ethics as a Marketing Tactic
Major corporations fear the damage to their image associated with press revelations of
unethical practices. Marketers have been quick to perceive the market's preference for
ethical companies, often moving faster to take advantage of this shift in consumer taste.
This results in the propagation of ethics itself as a selling point or a component of a
corporate image.
Marketing ethics, regardless of the product offered or the market targeted, sets the
guidelines for which good marketing is practiced. To market ethically and effectively one
should be reminded that all marketing decisions and efforts are necessary to meet and suit
the needs of customers, suppliers, and business partners. The mindset of many companies is
that they are concerned for the population and the environment in which they due
business. They feel that they have a social responsibility to people, places and things in their
sphere of influence.
Today, Segmentation, Targeting and Positioning (STP) is a familiar strategic approach in
Modern Marketing. It is one of the most commonly applied marketing models in practice. In
our poll asking about the most popular marketing model it is the second most popular, only
beaten by the venerable SWOT / TOWs matrix. This popularity is relatively recent since
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Distinctive Strategic Management
Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
previously, marketing approaches were based more around products rather than customers.
In the 1950s, for example, the main marketing strategy was 'product differentiation'.
The STP model is useful when creating marketing communications plans since it helps
marketers to prioritise propositions and then develop and deliver personalised and relevant
messages to engage with different audiences. This is an audience rather than product
focused approach to communications which helps deliver more relevant messages to
commercially appealing audiences. The diagram below shows how plans can have the flow
from
STP is relevant to digital marketing too, where applying marketing personas can help
develop more relevant digital communications as shown by these alternative tactical
customer segmentation approaches.
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Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
In addition, STP focuses on commercial effectiveness, selecting the most valuable segments
for a business and then developing a marketing mix and product positioning strategy for
each segment.
How to use STP?
Through segmentation,you can identify niches with specific needs, mature markets to find
new customers, deliver more focused and effective marketing messages.
The needs of each segment are the same, so marketing messages should be designed for
each segment to emphasise relevant benefits and features required rather than one size fits
all for all customer types. This approach is more efficient, delivering the right mix to the
same group of people, rather than a scattergun approach.
You can segment your existing markets based on nearly any variable, as long as it’s effective
as the examples below show:
Well known ways to segment your audience include:
1. Demographics
Breakdown by any combination: age, gender, income, education, ethnicity, marital status,
education, household (or business), size, length of residence, type of residence or even
profession/Occupation.
An example is Firefox who sell 'coolest things', aimed at younger male audience. Though,
Moshi Monsters however is targeted to parents with fun, safe and educational space for
younger audience.
2. Psychographics
This refers to 'personality and emotions' based on behaviour, linked to purchase choices,
including attitudes, lifestyle, hobbies, risk aversion, personality and leadership traits.
magazines read and TV.
An example is Virgin Holidays who segment holidays into 6 groups.
2016
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Distinctive Strategic Management
Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
3. Lifestyle
This refers to Hobbies, recreational pursuits, entertainment, vacations, and other non-work
time pursuits.
Companies such as on and off-line magazine will target those with specific hobbies i.e.
FourFourTwo for football fans.
4. Belief and Values
Refers to Religious, political, nationalistic and cultural beliefs and values.
The Islamic Bank of Britain offers Sharia compliant banking which meets specific religious
requirements.
5. Life Stages
Life Stages is the Chronological benchmarking of people’s lives at different stages.
An example is Saga holidays which are only available for people aged 50+. They claim a large
enough segment to focus on this life stage.
6. Geography
Drill down by Country, region, area, metropolitan or rural location, population density or
even climate.
An example is Neiman Marcus, the upmarket department store chain in the USA now
delivers to the UK.
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Distinctive Strategic Management
Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
7. Behaviour
Refers to the nature of the purchase, brand loyalty, usage level, benefits sought, distribution
channels used, reaction to marketing factors.
In a B2B environment, the benefits sought are often about ‘how soon can it be delivered?’
which includes the ‘last minute’ segment - the planning in advance segment.
An example is Parcelmonkey.co.uk who offer same day, next day and international parcel
deliveries.
8. Benefit
Benefit is the use and satisfaction gained by the consumer. Smythson Stationary offer
similar products to other stationery companies, but their clients want the benefit of their
signature packaging: tissue-lined Nile Blue boxes and tied with navy ribbon!
Market targeting
The list below refers to what’s needed to evaluate the potential and commercial
attractiveness of each segment.
Criteria Size: The market must be large enough to justify segmenting. If the market is small,
it may make it smaller.
Difference: Measurable differences must exist between segments.
Money: Anticipated profits must exceed the costs of additional marketing plans and other
changes.
Accessible: Each segment must be accessible to your team and the segment must be able to
receive your marketing messages
Focus on different benefits: Different segments must need different benefits.
Product positioning
Positioning maps are the last element of the STP process. For this to work, you need two
variables to illustrate the market overview.
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
In the example here, I’ve taken some cars available in the UK. This isn’t a detailed product
position map, more of an illustration. If there were no cars in one segment it could indicate
a market opportunity.
An example of a company using STP?
Any time you suspect there are significant, measurable differences in your market, you
should consider STP. Especially if you have to create a range of different messages for
different groups.
All three: (segmentation, targeting and positioning) are tools to align your products with the
right customers. The fundamental premise is that every product (or service) offers different
value for different customers.
For example, if you are a bank trying to get people to use a checking/ATM account, you
could think about diffrent types of customers that could benefit from that service. I can
think of a few in particular:
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
- High school kids
- Students going to college
- Families who relocate to a new state.
Same product, three different customer groups that would need the product for quite
different reasons:
- High school kids might want to start saving, bulding their credit, maybe saving for college,
and feel like they are special because they now have a real credit card.
- College students might need the convenience of an ATM card, receiving money from
family, and financial planning.
- Families who relocate to a different state might need a new bank because of proximity of a
branch, additional ATMs and other local services which their current bank may not offer.
In this context then:
Segmentation is the process to group customers in groups based on demographics,
firmographics - or ideally, their needs
Targeting is the process to market to a particular segment of the market
Positioning is the development of messaging (value proposition) for a particular segment of
the market.
Why is it important? because if you tell a college student "We have a great checking
account" you may not be as successful as telling the same student "We have the perfect
financial solution for college students: an account that gives you convenient acces to your
money, financial planning tools and monthly expenditure reports, and an easy way to
receive money from your family" the alternative to segmentation, targeting and positioning
is to do a shotgun approach with vanilla text, which is not very effective.
Citing the words of Bonnie Gretzner (2007), “If you don't understand the details about
customer segmentation, you're most likely letting customers--and sales--slip through your
fingers,” says one expert. Nowadays, in customer-oriented era, companies attempt to break
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
down markets into manageable parts of the consumer groups and treat them according to
the similar characteristics, that are called market segmentation. In this sense, Geoff
Lancaster and Paul Reynolds (2002) in the book of “Marketing,” state that increased
competition, better informed and educated customers, and constant changing demands,
urge companies to pay attention to segmentation issues. Segmentation has two approaches
depending on who are your customers: segmenting organisational market and segmenting
consumer market. As the study is undertaken on consumer product, looking at the bottled
water in particular, natural mineral water consumers, therefore organisational market
segmentation will not be discussed accordingly. On the website of the American Marketing
Association, William D. Neal (2008) in the article of ”Principles of Marketing Segmentation”
describes two ways of market segmentation: a priori and post hoc. A priori market
segmentation is based on adoption already known and usually used technique of
segmentation. In this case, companies do not conduct any research in order to identify
which segment is most appropriate, but they simply chose specific segmentation approach.
On the other hand, post hoc segmentation infers market segmentation based on the
thorough research of the customers’ evidences that come up as variables, will become a
background of the segmentation. Author recommends not using a priori segmentation as an
ease job in order not to conduct a research. As he states, due to dynamic society,” a misssegmented market is often worse for the firm than the mass-market assumption”. Whereby,
Mr. Neal depicts main variables, which should be considered for the research purposes.
These set of variables are: product attribute preferences; values; product purchase pattern;
product usage pattern; product benefits; brand preference; price sensitivity; brand loyalty;
lifestyle; status; attitudes and opinions toward environment etc. Market segmentation,
according to Frances Brassington and Stephen Pettit (1997) is important issue for any
business, because customers or segments have different characteristics and preferences
and these preferences are defined as variables, which must be considered by companies.
Therefore, segmentation is a stage when the company identifies all clusters of possible
consumers by grouping those consumers based on same needs, demands, requirements and
other different characteristics. That consequently will become the pool of options to be
targeted according attractiveness of the market(s).
Typpes Of Market Segmentation
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Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
Some basic segmentation methods will be discussed in order to identify alternatives for the
following consideration, which is the most appropriate for the natural Sugar Cane juice.
Geographic segmentation means to define customers according the location they live, for
instance, European consumers. Geographical segmentation is very easy to define. It is easy
for distribution system and establishing contacts with customers. But, the drawback of this
kind of segmentation, as Douglas and Craig state in the book of “Principles of marketing”
cited by F. Brassington and S. Pettite (1997), that concentrating only on the geographical
area is not correct, because even in a small location customers can have diverse wants and
needs. For example, in UK, people consider hot chocolate as a substitute to the coffee or tea
and the bedtime drink. However, French consumers see the hot chocolate as a nourishing
breakfast served with milk for children. Therefore, in addition to that it is important to make
customer-focused segmentation. Demographic segmentation is deeper approach than
geographic segmentation. It is concentrated on age, gender, race, income, occupation etc.
Demographic segmentation is as easy to define as geographic. It is measurable as well and
information can be accessible free. Advantage of demographic approach of segmentation,
let us say age, is ease to make a profile of an age segment and according to that decide
which strategy of communication and creative approach will be the most appropriate. On
the other hand, similar to geographic segmentation, not all the customers in the same
demographic range necessarily have the same needs and wants. Geo-demographic
segmentation is a merger of above mentioned. For instance, if the wine company is selling
old drinks in expensive price, company should know that some areas are populated with
inhabitants of high income and some areas are poor. Psychographic segmentation or
lifestyle segmentation is more complicated segmentation method than mentioned above. F.
Brassington and S. Pettitt (1997) define lifestyle segment as it is not based on the product’s
best qualities and the same issues but it is oriented towards customer’s emotional state,
paying more attention on the benefits, which can be given to the customer. As Geoff
Lancaster et al. (2002), describe psychographic and lifestyle segmentation it is about how
individuals spend time and money based on the personality, attitudes, education, cultural
and social background. Authors recognise early 1970s, J.T. Plummer’s idea of identification
of this phenomenon based on the next measures: How individuals spend their time on
activities; Their major interests; Their opinions about themselves and the world in general
On the figure 2.2, Peter Cheverton in his book introduces UK lifestyle segmentation
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
according to Martin Christopher Malcolm McDonald, 1995, who distinguish types of lifestyle
and divides according to percentage. One of the psychological segmentation is behavioural
segmentation, which considers separation of the customers according to their knowledge,
attitudes, responses and uses of the product. P. Kotler and G. Armstrong (2006) introduce
five different varieties of segmentation. Whereby, the first form of segmentation is
occasional segmentation. It means that segmentation is done according the particular
product usage. For example, Kotler and Armstrong bring an example of the orange juice
producers, who encouraged drinking orange juice not only during the breakfast, but also
consume at other times as well. Second type is benefit segmentation, looking at the
benefits, which can be delivered to the customer according the attributes of the product.
For example, tooth companies producing tooth paste for customers concerned to buy such
tooth paste, which are effective for sensitive teeth with whitening features, etc. Benefit
sought by Frances Brasington and Stephen Pettitt (2003) is seen in two scopes one is
practical though (e.g. reliability, economic, etc.) and psychographically oriented (e.g.
environmentally friendly, fast, healthier, etc.). In addition to that, according to Harvard
Business Note (2000) segmentation is differentiated into two types: benefit segmentation
and segmentation based on observable characteristics. Benefit segmentation can be divided
into two parts, people who pay more attention on the results rather than side effects and
people who are concerned on the gentleness of the product, avoiding side effects and
concentrated on the results. Third type is user status segmentation, dividing consumers into
the nonusers, ex-users, potential users, first-time users and regular users. There is also
another form of segmentation based on usage bat it pays attention on the usage rate. It
means that consumers are differentiated on the frequency or intensity of usage a product,
in particular, light, medium and heavy users. The final, fifth method is studying customers
based on the loyalty status, according which companies look at degree of loyalty towards
company, product etc. Strong loyal customers are most targeted people by the companies
whose service or product is attractive to the customers and try to sustain them by using
different marketing programmes. On the other hand, not loyal or partially loyal customers
can be targeted by other rival companies in order to take away them from competitors. On
that basis, accordingly, loyalty segmentation can be divided into two categories: brand loyal
and switchers. Some authors state that in some cases segmentation according to single
variable is not enough. According the Harvard publication (2006) is introduced multifactor
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
segmentation approach, when three factors are used to identify segment in
“threedimensions”.
Principal Requirement For Segmentation
Revising different authors’ views about segmentation, gives possibility to come up to the
principal criterions for marketing segmentation. First of all, segment must exist and not to
be an object of the marketers’ imagination. Existing market must be measurable or
identifiable in terms of size and purchasing power. Yet, this requirement in most occasions is
difficult to comply, because census data do not exist. Following requirement is
differentiability. It means that segment is distinguished and responds to the different
marketing mix and other incentives in a changing way. For example, if married and
unmarried women respond similarly to a new perfume, it means that they are within the
same segment. Obviously, segment must be accessible or reachable in order to establish
connection. On the other hand, in terms of business prospective segment must be
substantial and stable for a significantly long period. Under this requirement is mentioned
that tailored marketing program should be targeted to the significant amount of people
with the same needs and characteristics. In addition to that, amount should be such a big
that business should be profitable. And, final requirement is actionable criterion, which
concludes company’s capability to deal with so many segments as it is possible from the
company’s extent of resources (Kotler, Armstrong, 2006; Green and Tull, 1978; cited by
Neal, 2008). Due to the correct market segmentation, company can benefit from
distribution point of view, carry out business in an effective and efficient way, increase
sales/profit and market share. However, market segmentation becomes a dilemma for the
company, because of different reasons, such as incorrect formulation of marketing strategy,
incorrect understanding of the customers behaviour regarding to the marketing mix, more
theoretical rather than practical approach choosing wrong variables.
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Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id
Daftar Pustaka
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Pusat Bahan Ajar dan eLearning
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Hammond,
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Dr. Baruna Hadibrata,SE.,MM
Pusat Bahan Ajar dan eLearning
http://www.mercubuana.ac.id